 You guys take the one on the left here. These two here, to my left, at JNN. And if you have a phone, just turn it off. Turn it off? Yeah, or put it on your phone. What happened to the men? Did they wash them? And then you control it? But you watch for us to speak, and then put it on? Or after the presentation, and so on? No, I don't want to see them. OK, OK. Do I do that? OK, all right. All right. Just sit there. Sit there, there in ten times. Is he going to speak from here? OK, all right. I'm going to have him join me on the stage then. I have him join me on the stage right now. He'll just go straight to here. Where should I stand and introduce him? You stand here? Good to see you now. OK, OK, OK. Yes. Take a seat first. Now, that's it. He would know the exact number, but it's about six billion. OK. You're going to stand right here. Is it six, PRGD? PRGD is six, but the overall part? No, he's going to talk from here. Then they'll go up there afterwards. That may get you to, OK. Logistics. OK, all right. On average, all right. OK, all right. Good morning. Thank you very much. My name is Yukon Wong. I'm a senior associate with the Asia Program in the Carnegie Endowment. It's my pleasure to welcome you to this presentation of this IMF report. We're fortunate today in having Minjoo, Deputy Management Director at IMF, to introduce this report. We will then have a panel discussion with involving two of his colleagues at the IMF and two commentators, one from the Brookings Institution and one from the Carnegie Endowment. And you have their bios and CVs here. Minjoo requires no introduction. Very distinguished official in the financial sector, good friend of mine from way back. Before he took this position at the IMF, he was a senior official with the central bank and a senior official with the Bank of China. And he's among in the national community well-known for his interest in economic and financial issues. Minjoo, please, thank you. Thank you, Yukon, very much for hosting these events for us and thank you for your very kind introduction for me. And good to see you again. And yes, we have been friends for long. It's very nice to also warmly welcome all of you coming to these events. This is a very cold Washington winter. I'm impressed. Everybody take time off from your busy schedule as come to here. So we're very honored and very happy to have all of you here. We're going to use these events to launch our annual reports on the low-income country macroeconomic developments. Now, why is this a report? I think when we last year, when we looking for the low-income country economic developments in the past roughly 20 years, we see very strong growth clearly. We see improved macro conditions. But the key issues stood out really as the macro fundamental improved, the macro policy framework improves. And when we're looking forward, it become ever clear for us if the low-income country want to continue to maintain the strong growth and move forward, they got to continue to improve the macro policy framework and building a strong and a solid macro foundation. So the macro foundation is really the key aspect for the low-income country to move forward. And I'm afraid the macro institutes on Mondays maintain global macroeconomic financial stability. I think it's particularly for this group of members, which are count of 60 countries, roughly one-third of the members. I think it's very important for us to have a product for them and for the whole world. So then we start to produce this report. And so this is the second edition. The first edition is really just take the historical reviews, take stock. And this one's particularly focused on the current challenges, macro challenges, the low-income country facing today and how do they can move forward. So I will do a very quick brief and then leave to the panel discussions. So this is just a definition for the low-income countries. They roughly have 1.3 billion population, six countries within our 186 members. So this is a big group at the first. In the second, if you're looking for by financial classifications, the big group is actually we've got the frontier market, which are roughly half, 665 million and 14 countries. So in the lower part, they have fragile states. They have a very weak institutional capacity. And there are a little bit of between developing markets as well. If you're looking for the exports imports, you will say the commodity exports account 27 countries, roughly less than half. But a big chunk of them, 60% say diversified exporters. So low-income countries are not only commodity exporters. I think that's also very important. So let's go a little bit back to see how things run in the past 20 years. We'll see the growth has been picked up in the 80s, roughly 2.5%, 2.8% is the average. Move to 90, growth's picked up and above a little bit of four below. And then quickly, it really get into this century. So we'll see the growth pick up around the six and a half, six and a four. And in the 2010 to 2014 still, the growth maintained very strong. So growth's really strong in the past 15 years. And for this group, meanwhile, we're strong growth with continuous working on the macro conditions. You will see the macro fundamental dramatically, the key index for this one is really inflation. Inflation rate dropped dramatically, dramatically. From roughly 40% in average in roughly 20 years ago to today, below 10%. I'm 10% still way hard, but given the macro condition, it's still in the conditions. I mean, this is a really big, remarkable achievements. And we're also looking for the deaths. The deaths ratio is so much lower. Roughly started around like 65%, 68%, roughly 15 years ago and dropped dramatically. This is part of a due to the HIPPIC, HIPPIC Death Release, and which is also a big deal. But that's continued on downsides. A little bit of pick it up, but we'll talk about this later. So death level is much lower, which really helps a lot for its low income countries now. Now, this is very much in the past 20 years where observed, I would say the growth is a strong macro foundation has been improved and the resilience also improved as well. So those achievements also associated with various strong favorable external conditions, strong growth at the walls and favorable financing conditions and very high and increasing commodity prices. Now, all those will change. And so today they are facing challenges. The first issue is the growth and the level is the drops. You will see from 2010 to 12 is for the whole world it's really dropped from four and a half where today roughly three and a quarter, three and a half. And so emerging market particularly dropped from six and a half to today it's under four and a half and emerging market become more and more important trade and the financing partner for the income of countries as well. So external environment in terms of growth change and the commodity price we all know drop dramatically drop roughly indexed from roughly, if you take the 2005 to the 100 today it's roughly they lost a half. If you go back to roughly 2012 if you're looking for the number it's really from 200 drop to less than 100. So commodity price drops a lot which you heard quite a bit and the financial volatility is a key issue. Financial markets are very fragile and the financing, not only financial conditions are sparkling but let me take a few of the one or two minutes on these slides. These slides is really measured the financial market volatility. We measure financial volatility by the one day market movements against the 100 days moving average. So which is very specific concept. We measure by how much a standard deviation they move. If the market move one standard deviation we'll say it's okay. If a market move one day the market volatility is a two standard deviations I think that we think it's a quite good move already. Now last year what we observed this one in the US equity market we observed roughly more than five and a half standard deviation moves one day which is the biggest one since 1928. The market has been very volatile and then we see in the US and the yield market and also last year we observed roughly almost close to eight standard deviations movements which is the big one since 1962. And in terms of the currency market in the dollar and the yen we observe another four standard deviations last year which is the second largest in 71. Obviously the first one is when US decode from the gold and the exchange rate in such a volatile world. And if you're looking for the fixed which is the risk volatility index we observed roughly eight standard deviations and the last year in one day which is the biggest one since 1990. So the financial condition changes not only become much tightening but also and become very volatile which put tremendous pressure on the low income countries and the dollar getting stronger and the dollar liquidity getting tighter also put the pressure on the low income countries as well. So these are the two lines here so one line is the zero line is the dollar yen the index is against the yen dollar become much stronger in the past three years and this is the dollar euro also getting very strong. Now most interesting this is a rare bar it's a number of countries getting through crisis. You know it's very historically you will see when dollar getting stronger and the more country on the past and the more country getting into crisis why is that? Because when dollar getting stronger the low income country when you have the dollar exposure you borrow a lot of dollars loans. Number one your interest is increased number two you have to pay more because dollar become more stronger and your currency become cheaper convert to the local currency you have to pay more. So the copper balances and the silver balances are deteriorating along with the dollar strengthening. So this is the Latin American crisis during the 80s and this is the Asia financial crisis once again and when dollar is on up strings. Now this time the dollar is on up strings again and the most low income countries and emerging markets still hold on but market volatility clearly could increase as I indicated in the previous slides. So dollar getting stronger is also a quite a big external factor change because a lot of the income do have a dollar exposure and which put the prices on them as well. Now what are the impact of those things for them? So the first issues when you have the oil price drop to half and for most of the oil export countries only six months from December 2015 against the June 14th you see roughly June 14th year and a half you will see they lost roughly 11% of GDP income and for commodity exports lost 9% but for diversified exports of the income countries they gain roughly 2.5%. So oil price is really income redistribution but since quite a lot of low income countries on the commodity export countries they lost quite a big chunk of the income which is a big and the market condition change you can see clearly the capital flow and net capital flow is a really job capital flow peak before crisis and also peak again in 2012 and all the way capital flow moving on down. When capital flow moving down and the macro financial condition deteriorating the spreads for various countries from Ghana to Kenya and here's Mozambique particularly you will see the spreads increase to 1,850 base point now so which is a very big spreads increase indicating the market tightening and indicating the increase in financing costs for low income countries as well and with that and with income loss and with the tightening financial conditions so what the country do the exchange rates are really depreciated dramatically. So in the Zambia you see depreciation the exchange rate almost 50% and we will see Mozambique another 30% and you will see all other countries and Ghana's another say 25% and Mongolia even down and Mauritius and also 10% so exchange rates are depreciated so quite a bit so which help to balance the domestic financial situation but also make the paying external debts more challenging because the dollar getting stronger as I mentioned before overall so putting everything together on this chart so this is a summary chart we will see we divide the country into three groups the green groups that have a lower vulnerabilities and this is a medium vulnerabilities this is a high vulnerabilities compared with just five years ago 2011 to today you will see the countries in the high vulnerabilities groups increase quite a bit is really from roughly 27 to 28% to 37, 38% increase 10% but the country in the blue bar which is a low vulnerability really really drops roughly from 55, 55 roughly to 35 loss of 20% and the middle group also increase so vulnerability in the whole group roughly increase because change in external conditions and because the gross slowdown and domestic macro connection now the questions yes this chart said vulnerability increase are those countries in the crisis situation the answer is no they do have a growth and the growth is still maintained quite a strong losses of 4.5% growth we expect to see growth continue even a little bit of struggle since then last year and the exchange rate become the first line of the defense so they are able to use depreciation and to maintain the macro stability and inflation and change in not very much fiscal and the death situation deteriorating in some degree but also not very much so they will be able to manage this process I think that's a good news although the vulnerability increase so the next move is very much it depends on what the policy is helping to take to dealing with the situation I think that's become the key so they will very much define how much this picture will change in the next few years but before that the whole group also facing a few I would call the MAC trans challenges I take three the first is the climate change you see if the climate change impact on the agro area we will see and the vulnerable climate change for the surprise most of them will change in the Africa regions Africa region in the past few years experienced back in the force and the flood and the drought drought and the flood so the Africa region is the most the impact by the climate change I think this is one and also the low income countries has a high probability to get the drought and the flood and also this nature disaster impact as well and there's technology change with IT with all those artificial intelligence and with all the new oligarch development those things IT move dramatically whether the low income country will be able to catch the trends or they will continue to stay behind I think this is a big big challenge for the low income country whether they will be able to frock jump forward or they will stay behind I think this includes a huge opportunity for them but also includes a huge challenge of risk for the low income country as a group it's a big trend this is a common way you can feel every day and the the third one is a demographic change you will see this is the population millions of as people's age of 15 to 64 is a really very much the labor force you will see in the whole war the labor force really from 50s increased all the way but since this year we're here roughly continues on the down sides in the 2040 and the global labor force were on active territories so aging really played a role but it's not in the South Africa in the South Africa actually it's a working labor force to pick it up gradually and pick it up roughly 2060, 2070 and the graduates still have a huge labor surplus so the question is it's good news you have a labor it's good news but they provide education you have a job you create jobs for those group of people so this is a huge opportunity when the whole war there's a lack of a labor force and the sub-Saharan Africa region have a labor surplus now in the next 20 years the big flow is not a capital flow it's a labor flow but how can we do that? the migration process in the Europe are clearly indicated it's not an easy thing to do at all so this is three I just need a little quite a big mac trans there's really new issues facing the income country how do we do that? it's quite a bit of a challenge now bring everything together in the past 20 years per capita income increased dramatically I mean roughly they started 16 dollars it was constant dollars and it moved to double to close to 1500 a little bit over there and most of the pickup since this century from 2001 roughly pick the dramatic I think this is really really good news now the other side of that when the per capita income increased the productivity increased varies across different countries and you will see we did a decompose of growth for all the country we will see most of the growth come from capital investments and labor labor imports capital import and labor import but productivity is really really weak it's only in the non-friage and diversified exports you will see productivity increase take a big share but in the commodity exports and the fragile state of productivity increase it's negative now that's something worrisome because we know if we want to have sustainable growth we want to move forward the key issues you want to make sure the productivity will grow continuously that's the key issue you move forward particularly when you get into the level around the 1500 dollars rather than 600 dollars now when you move to 1500 dollars per capita GDP ratios your growth much more depends on the productivity increase whereas it depends on the capital input and labor input when the growth more depends on the productivity growth the whole growth more depends on institutional capacity depends on micro foundation and not only depends on the purely on investments infrastructure infrastructure still main issue the building solid micro foundation building micro policies and the building capacities and tax the income inequality all those issues climate change all become important become more and more important now and for those group of countries so that's come to the policies and so the policies priorities are very clear in short terms I think we have to dealing with external shocks the resilient become the key issues we need a manager that external shock is key issues then in the medium terms clearly the structural form become the whole issue diversified the exporters and the need to further push the structural form the labor market reform domestic revenue mobilization clearly clearly is the key issue and modernize the monetary policy framework and enhance economic resilience so it's really move forward for these groups maintain the resilience is the current challenge in short term maintain the growth but move forward building on the macro fundamentals and the more important on the physical side the monetary policy side and then they will be able to provide a base for them to move forward and the structural form the labor market reform and the product market reform influence structure investments you know investing education human capital is a clearly clearly the key issues for those countries to move forward so what I'm after can do in addition to produce a beautiful report I hope it's beautiful I think it's beautiful I hope you like it and we will continue our enhanced policy dialogue who is a member I think it's very important and also we're left or left our efforts moving to new areas we classically we focus on the macro stability is our job but now we move to the climate change we move to inclusiveness we move to the labor market reforms we move to infrastructure investments because those things are key issues key issues for those group people to move forward and when we do that we understand the capacity the weaknesses the key issue for those countries who will put more efforts into the technical system and the trainings and do little things I just come back from Africa so one stop is Ghana in Ghana we have a conference on statistics we bring 40 countries senior minister of finance and government statistics we talk about statistics and we do 600 more technical assistance for the region on statistics so you can see the capacity building is really a key area so we're working on for the regions and we're further of course to build the global financial safety for those group of countries to ensure they will be able to manage the current bumping financial market volatility and move forward so those are the the IMF things you can go on so on to the presentation please see the link okay that's good I even don't know that's this one so that's a means you can download my PBT right no uh-oh that's too bad okay I sort of wish to give them the email address anybody can download my my PBT we should do that can we so you see my boss said yes so so we should provide you an email address you probably would be able to download my PBT if you're interested instead of it they take a photo from your iPhone which is not very good quality I have to say so thank you thank you very much I will call you sir okay thank you it's a very good point before I let Minjoo leave and join the audience and call the panel I'd like to just ask him one question I mean I think he's given a very comprehensive presentation of the LLDCs 60 countries 1.3 billion people and in some ways a sleeper group they've been really doing quite well into recently the vulnerabilities have been increasing and sitting here and being interested in developing countries for most of my life you look at the headlines of what you basically see as the volatility in the Europe, the United States the bricks are collapsing, the stock markets, equity market exchange rates you don't read too much about the LLDCs I'd just like to get a sense from you in terms of his perspective from the IMF what what kind of attention should or will be given to the LLDCs is this a concern from your own own part traveling around the world in terms of interest and how do you think how do you think the community should actually react or think about these issues yeah good good good that's a very good question thank you on the it's a political difficult question no the answer is I'll give you a political right the answer is yes or no the answer is yes last year it's a year of development because we have eddies for financing for development we'll have SDG in New York we'll have a climate change in Paris the COP 21st I think the low-income countries developments is really on agendas on the top news and in the last year I think we get a lot of attention in the audience this is incredible I have to say SAOPL 40 really a fantastic deal 15,000 people attend that meeting and a lot of lively discussions the answer is no in the sense everything's faded quickly I have to say I am disappointed today not many people talk about the SDG not many people talk about the FFD which is financing for development the key issue is implementation how do we implement SDG how do we fulfill the pleasures pleasures we made and all international communities in audience in New York following common countries I think it's time to act I think that's the real challenge we're having today this group has made tremendous progress in the past 20 years as I indicated but they're facing tremendous challenges today the whole world needs to continue to pay attention on this group and also support them the fund is doing our own part so that's the reason we have this new products and that's the reason we come to this place to launch this event in Washington DC and we very much appreciate your support as well so continue to get international attention on the whole country understand the challenges facing, understand the need this is a big challenge for the whole international communities thank you thank you, let's give him a big hand let me call the panel up here now panel? yeah, please but I'm into my fun colleagues very fortunate to have a very experienced and distinguished group it's ironically split between colleagues here at the IMF and former colleagues of mine at the World Bank and it's also interesting to us at the World Bank how much interest the IMF now has been placing on poverty and structural issues we have Rupa Dutta Gupta and Chris Lane who together worked on this report and they will be responding and taking questions on the report itself and before they do so I'd like to introduce Uri Daidush, my colleague here at Carnegie Endowment who used to be the World Bank's Director for International Trade and Economic Policy and Amar Aditya Aditya at the Brookings Institution who's a senior fellow there and he formerly used to head the Secretariat for G-24 he's been doing a lot of work on global issues and particularly climate change I'm going to start off with Uri for some comments please okay, well thank you very much, it's a pleasure to comment on this IMF report I really think it's it's an excellent report that sheds a lot of badly needed light on the evolution of you know a large part of the world economy and the poorest part of the world economy which in general I believe is less well understood than the emerging markets that are in the news every day and of course the advanced countries these are the countries that benefit from a poverty reduction and growth trust fund set up by the International Monetary Fund in part by contribution from its gold sales as well as contribution of these to members and their related pledges to the fund I understand the fund currently is about six, seven billion dollars so that, right? Well, two billion on a significant self-sustaining two billion, annually two billion of disbursements yeah, so that's a significant amount of money for poor countries and in broad terms countries enter the list if the annual per capita income is below a threshold of about two thousand dollars per capita and also if they do not have capacity to access international financial markets on a durable and substantial basis I actually quite like this categorization even though I grew up you know at the World Bank without low income country categories I like it because it not only includes countries that are obviously very poor it's also more generally representative of poverty around the world the low income countries as defined by the World Bank are essentially African countries with one or two others this is much more these countries are all over the world moreover they include frontier markets, so-called frontier markets some fifteen of them which have partial and volatile access to international financial markets I like to have those countries in there because I think it better enables the analysis of what it takes to get low income countries up to move to the next level of international integration so I find this categorization quite helpful let me just highlight what I think are the five major contributions of the report and then raise one question an important question and the five to me the five takeaways so to speak are first of all that the LIDCs have experienced very high growth by historical standards in the last twenty years or so or fifteen years or so traveling their per capita income from very low levels since around 2000 this is despite the presence of twenty-eight fragile states states essentially in conflict or in recently in conflict moreover it's very impressive that their growth has persisted through the financial crisis and through the recent slowing in the global economy moreover as Minjoo so well illustrated there are a lot of other positives that you can see in their macroeconomic performance I'm especially impressed by the fact that they continue to attract high levels of capital flows and a particular FDI which has remained relatively stable so more and more of the capital stock in these countries is foreign foreign owned and foreign managed very important feature of international integration the second takeaway is that there is much more to the story of these poor countries than the commodity super cycle and the commodity super cycle and the effects are not generally understood in the international community or by journalists just to pick on one category by carefully desegregating exports and imports the report shows that many other IDCs are diversified exporters that's the first point not primarily commodity exporters and more important that many of the commodity exporters are of course big oil importers this means that contrary to the general view most LIDCs including most commodity exporters were actually disadvantaged in recent years because of the run up in oil prices and actually terms of trade gainers now over the last year and a half that comes out very clearly in the report the vast majority of these LIDCs are seeing positive terms of trade effects at present because of the fall in the oil prices and by contrast there are a small number of oil exporting LIDCs that do conform to the general view that is their growth was helped before and is suffering now and these are actually just four oil exporting countries and that is Yemen, Ghana, Nigeria and Congo okay so in general it is simply not true as the IMF analysis shows that the current configuration of commodity prices is damaging overall the growth of the vast majority of these countries nor is it true that they were the big beneficiary of terms of trade effects prior to the current episode the vast majority of them and I exclude some of the oil exporters so that's a very important insight the third takeaway is that the vulnerability that we have seen over the last three years is not by extension so much the effect of lower commodity prices although of course for oil exporters such as Nigeria, lower oil prices are a very important factor the increased vulnerability is also the result of the volatility and of generally not sufficiently prudent macroeconomic management in recent years the fourth takeaway is that nevertheless one cannot characterize the outlook for these countries as a bad outlook even in 2016 so if you look at the numbers projected by the IMF of course these are just projections and they could be wrong but I tend to believe them we're talking about 5% goals for the diversified exporters for the commodity exporters and 6% growth for the diversified exporters this is very impressive growth rates by long-term historical averages I'm bearing in mind that from low levels and we want to do more we'd like to grow at 10% I know that but these are very very impressive numbers to me fifth and last point I would highlight is that the report underscores the vulnerability of LIDCs to climate change on account of both a greater exposure to natural disasters and the sustained effect of higher temperatures on ability to grow crops and assure sufficient food supplies the two points I want to make here one is that these technical analysis of exposure to climate change actually understate the problem in a big way for low-income countries very simply because they're already very poor countries and because they have very limited capacity to respond so this is a much worse picture for them over and beyond the technical scientific analysis then it's suggested and the report I think correctly underscores and we should do that more and we should say that more in our international reports that this is really one of the long-fused time bombs lurking under the economic light landscapes when it explodes and if it explodes it will make the current conflict of fragility picture and the associated flows of refugees and internally displaced people look quite mild so that's an important point my question to me the great unanswered question which I think goes beyond the scope of your report so I don't wanna pose it as a big criticism to it the big unanswered question is what explains the large acceleration of the LIDCs since around the year 2000 without a good answer to that question we have little to guide our long-term expectations is the current slowdown the start of a new long-term or is it temporary? It's a question of course that applies to many other contexts but I think it's a particularly important one here the growth accounting analysis that Minjoo put forward you know the breakdown of growth into TFP human capital and capital accumulation actually tells us very little only that as we measure it there has been a higher accumulation of human and physical capital in these countries over the last 15, 20 years but the question is what enabled this? It's a critical question one way to underscore it is to say that over the last 200 years say 200 years most of these countries were in essentially subsistence agriculture or hunter gathers 200 years ago roughly if you look at your economic history and so over the last 200 years they went for extraordinarily low incomes to $600 okay that's the number that we have and then over the last 15 years they went from $1,600 to almost $1,500 okay I mean this is a gigantic job all right in historical terms why did it happen? Why did it happen? Is it global integration? Trade capital migration remittances? Is it cheap and powerful new technologies such as information technology? Is it a capacity and a willingness to learn and open up and learn from the technological frontier? Was it dead relief? Is it less conflict? Is it better policies? And so on. This should be the subject of the next World Bank or IMF report. Thank you. Thank you Uri. Amar? Thanks Yukon. So the answer Uri is all of the above. I knew that Amar. But you know the fund and it has said so in an earlier report would certainly say that you know the securing of macroeconomic stability was a very very important part of the story in enabling in some sense some of these other factors to take hold. So great to be here, great to follow Uri. So I you know and Uri's made my life easier because he's kind of made several points on which I can piggyback and maybe save some time and go straight into the discussions. So I think the first thing I wanted to say is on the classification. The IMF has defined the world in a way that I believe is very helpful but we should be clear in the way that it is different. And what do I mean by that? So if you look at the World Bank definition of low income countries which is defined strictly by a per capita income level then the total number of low income countries today are only about 31. And what's striking is that many countries that were low income countries have moved up but in a way they still you know as Uri pointed out hold many of the properties not just of poverty but of economic structure and of vulnerability and therefore having this wider definition I think particularly from a perspective of international policy and particularly from the perspective of the role of the fund I think is very helpful. So I actually think it's a good idea. Second, again I agree with all the lottery comments on the report and I just want to note that this is the second of course such report and I hope it becomes a feature because I think having the fund go into some depth into the ongoing issues of low income countries is very very helpful. Third point that comes through very clearly from the report is this in some sense let's say nexus between growth and vulnerability. I mean the two things we've learned is you know I mean if you look at the advanced countries is the US was considered relatively insulated from the world economy but we are beginning to see that the US is not that insulated from the world economy and in a similar way at the other end of the spectrum for a long time the low income developing countries were insulated from the global economy and the question now is if those trends persist what will happen? And the last five years what we've seen is the use of counter cyclical policies if you want to call it that but they have resulted in a widening of deficits fiscal deficits in some countries external deficits in an overlapping deficits in others. So there's certainly been a price in terms of vulnerability coming out of the policy side. Now was it really inappropriate? I would say not in all cases but you know there's a price to taking counter cyclical policies which takes me to my next point which is these are countries that are extraordinarily vulnerable to shocks. They remain extraordinarily vulnerable to shocks and these shocks have been amplified as Minjoo pointed out by the fact that they are now more financially integrated. And here I want to make two points. First is when you talk about shocks you have to talk about not only commodity prices but about the kind of natural disaster shocks that we're talked about and I always say that there is no such thing as a good hurricane. They are all asymmetric bad shocks that these countries have to face. And second you know if you are now more integrated you will see amplification of shocks. Now the point that I want to make in this regard is these countries do not have adequate safety nets to deal with it. Contrary to what Uri said the resources of the fund are meager to deal with the shocks of these countries. The fund uses these very effectively but if you look at the magnitude of the shocks and you look at what the PRGT can provide even with the relaxation it's a very very small faction and particularly you have to remember that you know if you get 10% of your GDP wiped out you can't do that just on the basis of lending. So when I was in the G24 I used to always argue that the fund is the best place to evaluate these shocks but it needs more firepower to be able to respond to it. So I still believe that the architecture for these countries in terms of shocks is not good enough and what then happens is that of course you get a ratcheting up of debt each time you have a shock. So it's quite important to think of the policy message coming out about vulnerability from two sources shocks and policies and to have frameworks to deal with it. The IMF in an analytical sense has laid it out but I think it's very important for countries and the shareholders in the fund to give the fund more ammunition to help these countries. The next thing I Minjoo pointed to was the SDGs. So you know there's no group of countries for whom attaining the sustainable development goals is more challenging than this group of countries and I want to distinguish between two components. So one message that comes through in terms of the aspirations of the sustainable development goals which is the elimination of poverty by 2030 and a decent life for all so that every child born by 2030 has access to basic services. If you think about that in the context of these countries it implies a social compact that they are way unable to meet right now. That's a challenge not just for these countries but for the international community. So one of the issues I do believe that the fund and the bank have to look at going forward is what will it take to sustainably meet the sustainable development goals? What does that mean? Delivery of certain services of anti-poverty programs but with long run viability that means domestic resource mobilization not just external support. This has been emphasized by the fund in other places but I think a central issue for these countries is going to be and it's emphasized very much in the report is strengthening domestic resource mobilization and particularly fiscal resources and for these countries tax avoidance not just by domestic entities but by multinationals is quite a big issue. The second issue which I want to focus is a big challenge for these countries is infrastructure. Infrastructure is central for not just maintaining but for long-term growth of these countries. When you look at the infrastructure quantity and quality of low income countries it is appalling and there is no way that they can take any advantage of new technologies or shift of production out of China or anything like that without developing better infrastructure and that challenge is particularly daunting in Sub-Saharan Africa. Second, the services that I mentioned water, education, health, all gender parity all these require infrastructure. Third, infrastructure is intimately linked to climate. The report argues that climate vulnerability is going to be very big. That will require investments. Now all of these are not freestanding investments. They are about making infrastructure more resilient most of the time. They are about of course also making agriculture for example, more resilient that will require both infrastructure also services. But the other point I want to make on climate is actually not about the adaptation side but about the mitigation side. Africa has in particular and low income countries more generally have not put the carbon out there that is affecting us all yet they will be most devastated by it. However, going forward low income countries and particularly Sub-Saharan Africa will be making choices that will have a huge impact on climate. And they are all related to the megatrends that Minjoo was talking about, particularly demographics. The fastest continent of urbanization in the 21st century will be Africa. The demographics are just startling. At the turn of the last century one person in the planet was from Sub-Saharan Africa. At the end of this century, four will be from Sub-Saharan Africa. Great opportunities but great challenges for climate and this will require again building infrastructure that is more let's say more respectful of the climate than it has been in the past. Now where does that relate to the fund? And it relates to the fund essentially because of the financing side which is not just pointed to in this year's report but was very much highlighted in last year's report which has to do with what is an appropriate approach to investment and debt. The financing costs for low income countries is by model or dichotomous. Let me explain what I mean by that. Either they get grants or if they go to the market the costs of financing are very high. For infrastructure projects the real costs of financing are 8, 10, 14% above benchmark. It is not surprising therefore that in Sub-Saharan Africa infrastructure costs are 20, 30 cents for electricity for kilowatt hour compared to four cents for example in the best parts of Asia. And one of the reasons for that is financing. So how the fund approaches this issue is very important. The fund has brought in a lot of flexibility on the debt sustainability framework but one of the challenges right now is how do you link financing to infrastructure. One of the conclusions of the analysis in this report is general purpose budget financing has not been an effective way for public investment. I think that's an extremely important insight from this report. But what would be an alternative form of financing that produces the infrastructure but does not leave a legacy of bad debt? Let me stop there, thank you. Thank you Amar. Before I open the questions up to the floor let me turn to my fund colleagues and ask him to respond to some of these questions. Let me add a few of my own based upon what I've been hearing here. One of the things that you've emphasized in the report is the special problems of the commodity exporters. And it goes back to the fact they've not become more diversified, they too relied on specific commodities in this super cycle downturn, their suffering. It goes back a lot to this issue of death disease. And ever since I've been studying economics which is a very long time we've been talking about the fact that if you become too dependent upon commodities you eventually are going to become a vulnerability of these kinds of risks. And the question is what really can you do about this? Because it doesn't seem like anything's really changed in 50 years of this kind of cycles and the down cycle. So the problems of the commodity exporters such as these issues, what do you do about it? A theme that's came out here is kind of interesting. Globalization has been seen as a very positive aspect. But globalization seems to be affecting everybody and increases vulnerability. And perhaps you comment a little bit more about the linkages across these country groups. And to what extent is this a negative thing or a positive thing, or can you do anything about it? And lastly, I think I'm all proud of a point in terms of your climate change. The report focuses on climate change. It talks about the needs in agriculture. There's a specific focus on infrastructure. So is this actually the major lessons from the climate change section? That infrastructure needs to be supported. And if so, the means you're doing so, we don't seem to have a way of doing this. What should we actually do about it? So let me just throw those three questions in on top of the other concerns that have been brought out and ask Chris and Ruth, does her like comment or take them as you see fit? Thanks again. These were very good comments and observations on the report and we are thrilled to see that you are interested in this work because we do intend to continue it on an annual basis. Maybe let me take a couple of questions both from Uri and Amar on growth acceleration and what might have been behind the magical 15 years as well as what are we doing about issues such as the fact that these countries now are in a bind. They need more resources. What do the SDGs mean? Now, as Amar alluded, we did a report that was actually in the world economic outlook there I used to work for looking at the growth acceleration of the same group of countries over the last 15 years. And indeed it is a bit of both, I mean both good luck and good policy and among good luck factors, a big component was obviously the integration other emerging markets and past 15 years has seen a spectacular growth of China and India. I demand external demand for low income developing countries have gone up. Commodity prices played a role for commodity exporters. Also the last 15 years have seen very accommodated or good financing for good opportunity for a number of developing countries to then use the low interest rate environment to tap market and many managed to do that and use it responsibly. Obviously good policy played, the analysis we did was striking in that it revealed that these conditions were uniformly available for all countries but one of you mentioned fragile states for example, a group of low income countries still could not take advantage of it whereas others did and they grew at very spectacular rates and there obviously identification is a big issue but what we see is a huge correlation between countries that managed to then take advantage of the debt relief and built space and lower inflation, improved governance, improved political stability through lower conflicts did much better and that was uniformly across both commodity exporters as well as the vertical exporters and this is unfortunately a cautionary note because given all that space I'm a question about how can these countries to counter cyclical because there is a cost to it in fact the availability of the fiscal space helped these countries to the global financial crisis with relatively actually continued to grow at 5.6% during 2007, 2008 and 2009 and because they could actually do that counter cyclical spending and right now the reason why there is a little more concern is since then this space has eroded including in many of the diversified countries that have managed to actually grow pretty well and so the question is now with many of these favorable external conditions going against them how would they cope out of headwinds? So before I answer one specific question that you raised also about the SDGs this particular year's report has a dramatic chapter which looks at the capital flows experience of these countries in a little bit more detail and we'll welcome any comments you have on that but one thing that is very notable is that it is first of all developing countries have become more integrated there is much more private capital flows in these countries but also the composition of these flows has changed so traditionally FDI was a big component of capital flows now you find these frontier economies if you will are going and being able to actually access private financing and obviously this is a double-edged sword so it has been exceptionally helpful in providing financing for much needed investment but in some countries they have also coincided with not necessarily public investment but also a ramp up in public consumption increase in fiscal deficits and some recent increases in public debt levels as a result now with US interest rate rising and already many of these countries looking at very high borrowing rates outside all of this will pose an additional challenge to how they can manage to face the headwinds without affecting the economic growth that much and here I think given that last year was the year of development and as added there was a big push even from developing countries themselves that what they really needed more help in was to raise their own domestic revenues and I think now is the time that this has become even more relevant because the external climate will sour a bit there will be lesser capital inflows given that this is a question of growth differential interest rate differential factors and a lot of these factors will start going against these countries and so looking inside and finding ways to structurally improve the revenue base is absolutely critical now and here what the IMF has done in terms of sort of increasing our support for developing countries in the context of the 2030 development agenda should help and already our sort of technical assistance on increasing domestic revenues is a quarter of our total capacity building budget and we plan to do more of this especially for developing countries not only in terms of improving TA increasing TA for improving tax administration but also the overall tax structure in order to address international tax issues where developing countries still don't or as I've mentioned in other countries let me stop here and I can take more follow-up questions later and maybe Chris can Okay I'd like to especially my boss I'd like to pick up on comment on the inadequacy of the financial safety net for some respects I can see exactly what you're saying our resources are limited but on the positive side we have a mechanism that if we see a big spike in demand from this group of countries we can go to our shareholders to ask for more resources and we can also take money from the funds budget potentially just a little update US Congress in January approved the increase in fund quotas which basically led to a super majority of fund members agreeing to this so our quotas are in the process now of doubling and that in turn allows about a 50% increase in lending not of these concessional resources but of our normal lending and at least half of these countries that we are talking about so some of the richer end are encouraged to blend in other words to take some concessional resources the concessional resources the envelope is increasing it may not be increasing as fast as we would like but it's on a steady increase and maybe finally just to pick up on some of these big questions from you on climate change and the link between infrastructure and we're looking more at this it's a little bit on the margins of the funds competences but we want to look at how climate change affects agricultural productivity and the extent to which irrigation mitigates that and at least the initial results are that many of the dark, cliched countries have rain-fed agriculture and low irrigation and even at a crop level data it seems that there's a very significant impact of the irrigation mitigates the impact of climate change because it lowers the average soil temperatures and makes crops more resilient to global warming and very finally on a Dutch disease I mean there's no easy answer to that I just maybe pick out one country Bolivia one of these 60 countries Bolivia is a hydrocarbon exporter mainly natural gas it has been the most successful I think in weathering this current storm it has large it has large financial reserves which has enabled it to to a very gradual approach not a sort of boom-bust move that we've seen in some of the other countries and I think that it's unusual in liking countries there are not many Norway's in Africa but Bolivia does stand out as being a relatively delicate country large fluctuations in commodity revenues very effectively I think we've maybe maybe just to finish we're really interested in hearing what what the audience thinks also is key issues coming up which would help which would help inform us as to what we should be looking at next I think we've given there are quite a lot of ideas here already but that's part of the reason we want to do outreach both in the US in Africa in Europe and in East Asia that's true but thank you very much do you all have been very patient here let me take some questions and please begin by saying where you come from and then let me start with the back there and then here thank you first I want to compliment my board member Ramar Bhattacharya very proud of him I'm Jomery Grusgraver with New Rules for Global Finance and I do support the the call for more resources for the fund because with more money you have less severe austerity but my question comes from a meeting yesterday of a former president of South Africa his Excellency Tabo Mbeki and the concern for outflows of finance from low-income countries what is the fund doing to stop the outflows so that there's resources to tax I'll stop there let me take one more question then I'm gonna take some answers then we'll go on this one here please I work in consulting and finance and business and go back and forth in some of the Asian countries and the US gap between your analyses and practice sorry can you hear me on this yeah I'd like to just I hear the emphasis on macro issues being the key thing and we've talked about debt issues volatility unemployment and my bias coming from these countries is to see how to link it into micro issues because all the issues we talked about like factor you know the growth coming from factor accumulation and not productivity those are all micro issues of where will the new businesses come from how will they innovate how will they compete in the market with new products and design and education right those are the things that will change the macro issues of debt imbalances and volatility and stability finally right but if I what I'm trying to get it is if I write to somebody in your organizations or the world bank they will say look we are working on something else we are not really interested in somebody focusing on micro issues and that itself seems to be like a capacity gap and like an asymmetry in how the policy circle moves and interacts with right like how can I write to you to make it even more micro like if I write to you and say look I'm interested in this micro aspect that will affect all of your macro issues that we've been discussing for the last 30 years and in the Asian crisis we discussed all this we're not really moving forward and much of the innovation is coming from outside fringes and and pressuring the global development agencies really how can we bridge this gap how can I write to you and then get a respond and say oh here's something actionable we can do together not analysis we've done the analysis right we've all read the same books and economics and had like you know, Nobel laureates write all the policy issues we can all go and book it up the key is action what can I do to get you out in some action that I am doing thank you thank you very much and we've got two very quite different questions we'd like to try to deal with them please let me give it a shot and then so on the first question if I understood it correctly you're you know a big concern of capital outflows it could is that to understand what is the driver of it it could be domestic policies for example lack of a good tax administration and focus a lot in our in our capacity building or that income that is not evading the tax system other big part which obviously is huge important in learning Africa that you mentioned out of the illegal outflows and there this is a new area and we are actually trying to understand first even focusing on how to separate out the two because in effect it is the same and in the IMF we have basically our policies under anti-money laundering and so what we are strengthening those policies and the implementation of the process but I think conceptually there is a big problem because it is very difficult to distinguish between sort of outflows that could easily be contained through domestic policies versus domestic economic policies versus other kind of outflows well you raise a very important question I'm afraid that you're right the IMF focuses on issues that are macro relevant we look at the overall story at the same time especially for for example structural reforms what we are trying to do now is to see at least the broad areas through which for example we mentioned that TFP growth has been disappointing but where can there be more bang for the buck in order for TFP to grow so recent studies at the IMF has focused on that question but it's still at a macro level and we've identified for low-income countries agricultural productivity infrastructure all of these areas where structural reforms seem to be paying financial sector reforms than in other countries where one interesting finding is there's that 90% of the outflows three countries and then in another bunch of countries there are unexplained inflows so actually the imbeki report looks at the outflows it gets more complicated when you start looking at unexplained inflows so there's a lot of data and methodological issues here and it's very differentiated across countries it's not a general in our views not a general issue it's a very specific it may be a country by country issue I would like to respond to the gentleman here about the micro-macro I mean going back to the world bank in the world world bank produces these world development reports they're very macro go through this report and you see 50-60 boxes these are the micro each box has this it's very specific micro level example something that works because the world bank realizes to be credible you have to have these kinds of specific things which are actually being done by someone that changes something dramatically so my first advice to you is don't give up on this actually because people are constantly looking for these kinds of micro interventions which actually make a difference illustrative principle and then it can be disseminated so if you actually have those kinds of ideas and you find the right people they are also very keen I think in using those ideas to actually build up a broader point so my point really is this is a big issue it is a challenge but there are outlets for this to be actually to move forward but you have to go back to the specific people who are dealing with these kinds of policies and choices if you find somebody in agriculture who is looking for a particular way to intervene that self-financing sustainable let's say an irrigation and constantly when you pick up an irrigation or macro agricultural report there will be a box of some particular way of doing it that is striking innovative or helpful so if you can locate those people who are interested they also are looking for exactly the kinds of examples that you're talking about so it is you have to be a little bit persistent about this this may mean about persistence there's some questions over here let me let me take here and then back there then let me take a few more you go ahead please Anith Mukherjee Center for Global Development Policy Fellow first of all many congratulations on this wonderful report I think it's very timely and a lot of the policy talk in Washington about this decline in oil prices has not kind of focused on those countries for example Ion which of India is having a bonanza in terms of fiscal fiscal resources so there is there was a very immediate and important need to differentiate I have two questions and this is basically things in mind when I was giving through the report one is the category of fragile states and I worked in one which is Yemen and which was not a fragile state then which is a fragile state now but I don't think internally anything has changed in the government is it a is it a box where we just put in countries and is it easy to get out of that box and this is analogous to the World Bank's graduation policy so you graduate out and then you graduate in how does how does that work in terms of IMF's policies the second question that I have is when we went we looked at the recommendations that was the last slide it seemed that those are the usual IMF recommendations one question that I have is that in these recommendations you'd you talk about prudent macro management including debt right and then Mr. Mimsou talked about sustainable development goals and we need to increase resources what kind of a debt sustainability number is the IMF looking at in terms of debt to GDP ratio is there a variation is there a range what what are the indicators okay let me take that question there Bill McGreevy I used to work at the bank for almost 20 years and now teach over at Georgetown and international health I went through the list and of the countries and the first table I visited fewer than 15 of those countries I work mostly on Latin America that may be part of the reason but it suggests to me that these countries on this list which I find to be very interesting different from licks and mix as they sometimes call them maybe they're not getting enough attention maybe one thing and this is where my question comes in the bank and fund could think of a series of meetings in which people would come from these countries uh together to address the kinds of issues you identified and perhaps learned from each other I understand there are critics who think isn't necessarily found inside the beltway that it may be necessary to go and to learn from each other in these countries in other words would that be a way to help thank you there was one question over there and then let me ask the respondents we you did we have your head up oh please please right here there yeah I'm sorry you've been too patient thank you okay thank you I'm Cinnamon Dornsy from Johns Hopkins SICE and my question relates to a point in those recommendations where we said where Minju recommended that we reform the concessional lending facility and then Amar pointed out I think the obvious that the financing available and that is rather meager and then we had Chris pointing out in fact that what we can do is actually ask shareholders for more funding okay and then Rupa pointed out that in fact looking at solutions for this that if you're talking about domestic resource mobility are in fact dedicated in that direction so maybe just take it how how would you go about reforming the soft lending facility apart from asking shareholders for a day fine let me ask you for some responses then okay let me on the prudent debt limits we have a framework for assessing debt sustainability it's called debt sustainability framework it's quite complicated but it basically differentiates capacity to carry debt according to the institutional strength and then it looks at how robust our countries to shocks so how robust is to a devaluation or to a commodity price shop we've come a long way with this but we every three years we review it and then we're having stakeholder conversations now both with borrowing countries and credit to countries as to how we can strengthen this further for example the framework doesn't anticipate a drop in oil prices from $120 a barrel to $30 a barrel should we have more of these extreme tail events risks in our assessment of the capacity to carry debt that's I think so this is ongoing work but we're very much focused on the issue and it's very we have to balance the interests of borrowers and creditors it's always very contentious any little tweak to this policy it's either going to please or annoy one or the other side on the reform of facilities I've done three or four reforms since I've been at the fund of the soft lending facilities they're more evolutionary than radical I think perhaps the as we have more countries that have market access but that's low income probably the most promising area to look at is having sort of credit lines that countries can draw on if they lose market access we have those for upper middle income countries like Mexico Colombia there's a lot of interest in developing something similar for low income countries but it's it's not an it's so there is thought going on in that that area and also on sort of facilities that are specially tailored to other small states as Minju mentioned very vulnerable to natural disasters and also to fragile states countries that have recurring fragility how do we how do we support them without piling on debt so I think those are the two areas that we're quite focused on the comment on the inside the Belze recommendation in fact believe it or not we cross the street a lot more often than you think and on this particular issue particularly we are also engaging with the World Bank and on for example on tax administration we now have a joint program to increase capacity building in low income developing something we launched just before Addis and work is ongoing on that and so yes to do more but we are already doing it I'm going to take another round of questions and then responses over starting over here please these two I'm Cathy Schalk from the U.S. State Department's Bureau of Population Refugees and Migration and I was struck in particular by the slide that had to do with labor pools and the shrinking availability in much of the world and growing in Africa and when you sort of superimpose that on the climate change vulnerability the other vulnerability the concentration of poverty and fragile states and the political difficulties of that we're seeing right now with with so much migration I'm just wondering what you think the implications of some of your findings in this report are what we should what should we brace ourselves for when we think about migration and willing to stress who are looking for a better way of a better life and push back against that sort of thing Thank you My name is Arun Kashyap I have just come back to Washington D.C. after completing my last UN assignment as resident coordinator of Western Caribbean countries and also head off the United Nations Development Program there It's this was an excellent report and I absolutely agree with the comments that have been made just a couple of issues I'm very you know in certain ways I'm very happy in terms of the classification of least income developing countries which has increased to 60 from 21 the reason I say that is even for all these Caribbean countries which were upper middle income countries the issues of democratic governance were extremely important and I find or at least I did I've not read the report but I did not hear anything in the report not only in terms of how governance issues become very important and looking at the economic growth not only the past one but even as we move into the future that if you're looking at the prospects of that and related issue then is the whole issue of equity because most of these countries have had a very high net income it's because of of the total inequities that are existing in the countries and finally that's some some of the question that came up that in terms of the sustainable development goals now climate change is a part of the sustainable development goals and if all of us as the international agencies do not talk about the sustainable development goals I think it will not give it the due credit and the service that can come out of that thank you very much a very good question please and I can I just answer the five minutes question which I admitted to do on the definition we work closely with the bank and the OECD on to the definitions of fragility both the bank and the OECD are thinking of moving in response to I think some of the the fragile members of the bank moving to a much more multi-dimensional concept and and we are likely to follow actually for a long time we didn't want to have a single definition because we didn't want to box countries some like to be fragile others not it may be just on migration and climate change I mean this is the issue of the day it has macro impacts I think where we're coming from is that global public good aspects here in that the countries that I say for my my Jordan and Lebanon are actually the incentive structure is not quite right for them that they are spending money large amounts of money and they're already highly indebted in maintaining these this immigrant population and Europe also has an interest in supporting that in the sub region as well and so somehow there's working on this incentive structure but this is actually deviating somewhat from the low income report that we've discussed today but it's very much a live issue I think both the bank and the fund and elsewhere I can just make a remark last year we wrote a joint report with the World Bank on the sort of the migration our demographic evolution and what does that mean for the whole for global economy again it's it's a there are pluses and it's a huge opportunity but it would come only with the right set of policies claiming in order to absorb like Lindsay's presentation said a very rapidly growing young population in the world where which is aging and that was the focus of last year's global monitoring report but in this particular report it was out of the scope and then very quickly on equity issues this is new work in the IMF that we have started really focusing on particularly because in low income countries because a number of the structural reforms that they have to undertake be it domestic revenue mobilization be it financial sector reform has very critical equity in integrated that do not always work hand in hand with efficiency so on the one hand we recommend say you know value added taxes or financial sector liberalization in a low income country context where the degree of informality is very high or productivity is low even though the overall size of the high can increase with these reforms equity equations then then a big focus of our overall analytical work on low income country issues and we hope to actually integrate some of the findings in some of the future reports on thank you you've been a very patient and very good audience I'd like to thank our colleagues at the IMF for this extraordinary board elective St. Gory for his comments and let's give everyone a applause here it was really done well done thanks you thank you thank you for you nice to see you again I'm glad if you hadn't planned to come over without brought you over here for a while so I said I haven't seen you around here very much so it's good to have you over here from India yeah who asked you the fragile state question oh very much my book I did not know you're in cgd now oh okay okay well thank you I don't know it's been very not a graduate to come oh so it's been a long association and I've come to come in communication because we're ready for you yes I had to do all those things that I want to help yeah no but that's good the doctor is publishing it's excellent I don't know where she is oh my gosh she has